Danone SA is making a move to acquire leading kefir manufacturer Lifeway Foods, offering $283 million, or $25 per share, for the publicly traded company, according to a Schedule 13D form filed yesterday with the U.S. Securities and Exchange Commission.
French conglomerate Danone, through its Danone North America business, has been a long time shareholder in Lifeway with a 23.4% minority stake, and the offer to purchase the company outright comes against the backdrop of record sales growth, as well as an ongoing family feud between CEO Julie Smolyansky and her mother and brother, also shareholders and former executives at the brand.
In a letter addressed to Smolyansky, Danone deputy CEO Shane Grant said that an acquisition could provide Lifeway “an attractive opportunity to achieve its full potential … removing the constraints and additional resources required for a publicly listed company of Lifeway’s size.”
Reports of Danone’s acquisition offer appear to have been received favorably by investors as Lifeway’s stock price rose over 40% this morning following Danone’s SEC filing.
If successful, Lifeway would be the latest health and wellness-focused business acquisition by Danone. Most recently, Danone purchased “whole foods tube feeding” business Functional Formularies in May and previously acquired a majority stake in plant-based CPG brand Harmless Harvest.
In 2022, the company announced its Renew Danone initiative, which emphasized portfolio rotation and M&A as ways to drive growth at the company. As part of the plan, Danone also divested its Horizon Organic and Wallaby brands.
In June, Danone announced the “next chapter” of the Renew Danone program, which included new focus on protein and gut health trends – the latter being a strong focus for Lifeway as well.
Founded in 1986 by Ukrainian immigrant Michael Smolyansky, Lifeway is the top producer of kefir in the United States and has been a publicly traded business on the NASDAQ exchange since 1988. Following his death in 2002, Michael’s daughter Julie Smolyansky assumed the chief executive position.
According to its full year 2023 earnings report, Lifeway reported record annual net sales of $160.1 million last year, up 13.1% with 760 basis points of gross margin expansion.
Its refrigerated kefirs continue to form the backbone of Lifeway’s business – that line was up 24.8% to $156.2 million in U.S. retail dollar sales in the 52-weeks ending July 14, 2024, according to Circana data tracking the MULO and convenience channels.
Lifeway’s current growth streak arrived after a significant downturn around five years ago, when the company was consistently posting double-digit quarterly sales declines with six-figure operating losses. In May, Julie Smolyansky told BevNET that the company has benefitted from focusing on its fermented dairy portfolio – dropping previously launched plant-based lines – and is now embracing a strategy focused on health and wellness messaging with an eye towards international expansion.
Earlier this month, the company announced it would begin distributing its kefirs in South Africa.
Despite the strong performance, the company has been embroiled in a yearslong battle between Julie Smolyansky and her brother Edward Smolyansky, a former executive with the company, and mother Ludmila Smolyansky, the brand’s former chairperson, who have called for Julie’s ousting as CEO on multiple occasions, most recently in July.
Edward and Ludmila are now in the process of launching a competing kefir business called Pure Culture Organics and last week Edward announced they had purchased a dairy production facility in Wisconsin for the project.
Update 9/24/24: In a press release shared with BevNET this afternoon, Lifeway confirmed it had received the unsolicited offer from Danone and its board of directors “in consultation with its independent outside advisors, will carefully review and evaluate the proposal to determine the course of action that it believes is in the best interests of the Company and its stakeholders.”
Update 9/25/24: Edward Smolyansky has provided the following statement to BevNET: “While it’s still early to fully assess this development, we view it as positive recognition of the work my mother and I have dedicated to Lifeway Foods over the past five years. The offer validates the significant potential for continued growth and innovation within the kefir market.”